Program Area: Oil and Gas Management. This Instruction Memorandum (IM) only applies to the Miles City Field Office, North Dakota Field Office, and the Great Falls Oil and Gas Field Office.

Purpose: To provide field offices (FOs) with updated and consolidated guidance regarding preparation of FPM.

Policy/Action: An FPM is used to identify the completion of the first well on a lease considered to be capable of production in paying quantities. An FPM is also required upon completion of the initial well under a unit agreement or communitization agreement (CA) involving Federal or Indian lands, even if previous first production memoranda have been written for any of the individual leases committed to the agreement. The FPM is the method used to transfer leases from terminable (nonproduction) status to non-terminable (producing/royalty or minimum royalty) status.

An FPM must be prepared promptly in all cases where a well capable of production in paying quantities is located on the Federal or Indian leasehold or on non-Federal or non-Indian lands communitized or unitized with Federal or Indian lands. Accordingly, the FOs must monitor all new well completions and recompletions on Federal and Indian oil and gas leases and on non-Federal and non-Indian lands within all unitized or communitized areas. The FPM is to contain the operator’s name, well name/number and location, and the well completion date.

General guidance regarding FPM is provided in BLM Handbook H-3107-1. In order to streamline the process, some of the guidance provided in the Handbook is superseded by this IM. Following are detailed instructions for specific situations where FPMs are necessary:

Lease (Federal and Indian)

When a lease becomes productive, an FPM is required. The instructions in Handbook H-3107-1 remain appropriate except that the following information does not need to be provided:

-Total depth and surface elevation

-Producing formation and intervals

-Initial daily production

-Well capable of production in paying quantities? (this is not needed because an FPM is only written when the well is capable of production in paying quantities)

-Current Status

This information is not necessary to transfer leases from terminable status to non-terminable status and therefore does not need to be included in the FPM.

An FPM for a Federal lease must be sent to the State Director (MT9222). An FPM for an Indian lease must be sent to the Superintendent of the Bureau of Indian Affairs (BIA) office that administers the lease. A copy of the FPM must also be sent to the Minerals Management Service (MMS) at the following address:

MMS-MRM

P.O. Box 5760, MS 357B1

Denver, CO 80217

As a reminder, an FPM must also be prepared for any subsequent unit well completion that establishes production in paying quantities for the first time on a lease within a unit area. The FPM will serve to set up a lease account for royalty purposes prior to establishment of an Exploratory Unit Participating Area (PA).

Communitization Agreements

Federal

CA Approved After Well Completed (Producing CA)

A majority of the Federal CAs are submitted and approved after the well within the CA has been completed. In this situation, the FOs are not required to prepare an FPM. The CA approval letter will serve as the FPM through inclusion of the following additional information;

§ Well completion date

§ Well name/number and location

§ Identification of leases that will be held by actual or allocated production

The CA approval letter will be sent to the operator. A copy of the approval letter must also be sent to the Montana State Office Fluid Minerals Adjudication Section. It must specifically be identified as a first production memo by including (FPM) after the office code. An example is as follows:

cc: MSO (MT9222) (FPM)

A copy of the letter must also be sent to the MMS at the above address.

CA Approved Before Well Completed (Non-Producing CA)

When a non-producing CA becomes productive, an FPM is required. Please follow the same instructions as for a Federal lease as described above.

Indian – All CAs (Producing and Non-Producing)

Indian CAs are approved by the BIA based on recommendations from the FOs. Since the approval letter is not done by the BLM, an FPM is necessary on Indian CAs. Therefore, when an Indian CA becomes productive, an FPM is required. Please follow the same instructions as for an Indian lease as described above.

Unitization Agreements – Exploratory Unit PA or Secondary Unit (SU)

Federal

The FOs do not need to prepare an FPM for PAs or SUs. The PA or SU approval letter prepared by the Reservoir Management and Operations Section (RM&O) will serve as the FPM. The information concerning which Federal leases will be held by allocated/actual production will be added to the PA or SU approval letter. The PA or SU effective date will be used as the first production date of the PA or SU.

The PA or SU approval letter will be sent to the operator. A copy of the approval letter must also be sent to the Montana State Office Fluid Minerals Adjudication Section. It must specifically be identified as a first production memo by including (FPM) after the office code. An example is as follows:

cc: MSO (MT9222) (FPM)

Copies of the approval letter must also be sent to the appropriate FO and to the MMS at the above address.

Indian

Indian PAs and SUs are approved by the BIA based on recommendations from the RM&O. Since the approval letter is not done by the BLM, an FPM is necessary on Indian PAs and SUs. Therefore, when an Indian PA or SU is approved, an FPM is required. Since the RM&O will be coordinating with the BIA, the FPM will be prepared by RM&O. The information concerning which leases will be held by allocated/actual production will be included in the FPM. The FPM for an Indian PA or SU must be sent to the Superintendent of the BIA office that administers the lease. A copy of the FPM must also be sent to the appropriate FO and to the MMS at the above address.

Timeframe: The policy is effective immediately. FPM must be prepared within five days of receipt of a completion report.

Budget Impact: The intent of this guidance is to consolidate guidance on FPM and to streamline the process, which should create cost efficiencies in time and allocation of resources.

Background: General guidance regarding FPM is provided in BLM Handbook H-3107-1. Supplemental guidance was provided in IM No. MT-90-197, IM No. MT-96-056, and IM No. MT-2008-045. There has been some confusion recently regarding which guidance is applicable. Also, some newer employees were unaware of the previous IMs. This IM consolidates the guidance and brings it up to date.

Manual/Handbook Sections Affected: BLM Handbook H-3107-1

Coordination: This guidance was coordinated with the affected FOs and the Branch of Fluid Minerals.

Contact: Please direct any questions to Will Lambert at (406) 896-5328.